MEED conference told IMF Kuwait Article IV report to call for new policies to increase efficiency and productivity

The MEED Kuwait Projects Conference was told this morning that the IMF’s Article IV report, due to be released early next month, will call on Kuwait’s policymakers to take steps to counter the effect of lower oil prices by boosting efficiency and productivity.

“There have to be macroeconomic and structural reforms and realignment of incentives for workers and companies,” IMF deputy division chief and mission chief for Kuwait and Oman A Pradad said.

“The economic model relies on oil,” Prasad said. “The government is the dominant force in Kuwait. It’s been receiving oil export receipts and distributed them.”

“This model has served the country well so far, but with oil price uncertainties it might not work in the future,” Prasad said. “It is not that this model has not met its objectives. It’s the future that we need to worry about.”

Prasad said the figures show that the labour productivity in all GCC countries has declined.

He said that Kuwait’s been spending less on capital investment than other GCC members.

“Current spending has risen and this has gone into wages and subsidies,” Prasad said. He said the government is looking at wage policy to temper these trends.

“The quality of infrastructure in Kuwait is low: in roads, port transport and airport transport infrastructure,” Prasad said. “Efficiency and productivity need to increase.”

He also said the number of Kuwaitis working in SMEs was low.

“The wage structure does not encourage people to work in the private sector,” Prasad said. “This has to change. All this is raising the fiscal gap.”

“More needs to be done about labour regulations and to educate the workforce and reduce government bureaucracy,” Prasad said. “The effectiveness of investment in education needs to be monitored.

“At present, producing non-tradeables is less risky and more profitable for firms because they can benefit from cheap low-wage foreign labour and the rapid increase in government spending,” Prasad said. “The SME policy has to be dynamic and it has to have linkages with some state owned enterprises.”

The MEED Kuwait Projects Conference is organised with the support of the Ministry of Public Works, the Kuwait Direct Investment Promotion Authority and the Public Authority for Housing Welfare.

Silver sponsor is Al-Tijari. Bronze sponsor is Al Tamimi & Company. Conference sponsors are Aconex, Al Ruwayeh & Partners, Ali Alghanim & Sons Group General Trading & Contracting; Drake & Scull and PACE. Associate sponsor is Al Oula Shamal Azzour. Networking sponsor is Mushrif Trading & Contracting Company.